London financial freesheet City AM reported a 95% slump in profits to just over £20,000 in 2011, while the publisher's highest-paid director received a pay boost of almost a third.

Pre-tax profits dropped from £439,000 in 2010 – the first year the publisher managed to get into the black since launching in 2005 – to £20,365 last year. Operating profits also fell by almost 38% to £454,716.

The publisher blamed the profit slump on a 16% increase in costs to £8.1m, primarily caused by an increase in newsprint prices of a fifth and investment in editorial and digital development at the paper.

Despite that, revenues increased by 11% to £8.6m. Income from digital, events and seminars accounted for 10% of the total, up from 3% of total revenues in 2009.

The publisher said an expansion plan in 2012 has seen revenues in the first seven months up by 20% compared to 2011. Non-print revenues accounted for 13% of the total in the first seven months of 2012, with a target of 20% next year.

Newspaper advertising, which accounts for almost 90% of total revenues, increased an impressive 16% year on year in the seven months to the end of July.

The company employed 49 staff last year, 26 of those in editorial roles. Employment costs, including wages and salaries, climbed 15% to £2.98m.

In May, City AM boosted circulation by 30% from 100,000 copies to 131,000, targeting the commuter belt in the south and south-west and doubling the number of stations where it is handed out from 105 to 212.

The publisher has also launched online recruitment site CityAMCareers, and a monthly luxury lifestyle magazine called Bespoke.

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